Golden Brexit opportunity for the European Union

When it comes to Brexit deals, the British House of Commons can hardly agree on anything. The European Union (EU) will soon have a golden opportunity to take control, and that is good news for the pound.

On Thursday evening 14 March, the British House of Commons seemed like a toddler who mainly knows what he does not want. Once earlier this week the Brexit agreements were voted down, a majority of parliamentarians spoke out against the proposal to leave the EU without agreements on Thursday 14 March. Subsequently, the plan to hold a new referendum was also voted down and May was given permission to ask the EU for a postponement.

It is not yet certain whether the EU will agree to this request. This is because permission is also required from the 27 other member states and Prime Minister Mark Rutte has already said that British Prime Minister May must then come up with very good arguments. For the time being, May seems particularly keen to present her agreement to the House of Commons a third time, after 2 hopeless defeats. You don't have to be a fortune teller to predict what the outcome of that voting round will be.

How hard is Brussels playing it?
Moreover, some Eurosceptic governments in the EU have already received a visit from British politicians, who would like to see the country turn its back on Europe on March 29. If that succeeds, we will suddenly be heading for a hard Brexit again. The chances of that happening are slim. In this scenario, the British can point the finger of blame at the EU, which does not give enough time to find a good solution. And Brussels is not eager to be blamed for all the misery.

The EU now has the golden opportunity to take control, for example by setting hard deadlines. The financial world will then gain something it has been missing for more than 2 years: clarity about the future. On Tuesday, March 12, the British pound fell nearly 2% as the May deal headed for another defeat. The British currency has since erased that damage. If May manages to force a postponement, the pound could rise even further.

Joost Derks

Joost Derks is a currency specialist at iBanFirst. He has over twenty years of experience in the currency world. This column reflects his personal opinion and is not intended as professional (investment) advice.

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